The United Arab Emirates announced on Friday that it would deposit $3 billion in the State Bank of Pakistan to bolster the country’s dwindling foreign reserves.
With the announcement, the UAE will match assistance from Saudi Arabia which agreed to park $3 billion in Pakistan’s foreign exchange reserves.
In a statement carried by the state-run WAM news agency, the Abu Dhabi Fund for Development said it will deposit the much-needed money in the coming days to enhance Pakistan’s liquidity and monetary reserves of foreign currency.
“The country’s support for Pakistan’s fiscal policy is based on the historical ties between the two people and the two friendly countries and the desire to further develop the bilateral cooperation in all fields,” it added.
“The Abu Dhabi Fund for Development has financed eight development projects in Pakistan with a total value of AED1.5 billion, including AED931 million in grants. The funds covered projects in sectors such as energy, health, education and roads.”
Prime Minister Imran Khan thanked the UAE government for the support during ‘testing times’.
“I want to thank the UAE govt for supporting Pakistan so generously in our testing times. This reflects our commitment and friendship that has remained steadfast over the years,” he wrote on social-networking site Twitter.
Foreign Minister Shah Mehmood Qureshi also thanked the UAE crown prince for “his generous financial support of US$ 3 billion”.
“This is a manifestation of the close fraternal ties between Pakistan & UAE which have always stood the test of time,” he wrote on Twitter.
The move came a month after Premier Imran’s day-long trip the UAE during which he met with his counterpart Sheikh Muhammad bin Rashid Al Maktoum, Crown Prince of Abu Dhabi Sheikh Muhammad bin Zayed Al Nahyan, Deputy Supreme Commander of UAE Armed Forces and other dignitaries.
The two sides had agreed to chalk out a road-map to accelerate cooperation and partnership in areas encompassing trade, investment, economic development, energy, infrastructure and agriculture., with a view to accrue early dividends from economic partnership.
The prime minister also made similar visits to Saudi Arabia and China in an effort to seek loans to bolster the depleting forex reserves which have dropped to four-and-a-half year low.
The Saudi kingdom agreed to park $3 billion in Pakistan’s foreign currency reserves for a year and establish a credit line worth $3 billion for the sale of petroleum products on credit for three years.
Islamabad has received two $1 billion tranches from Riyadh, while the third installment is expected in January.
The cash inflow has improved the country’s capacity to pay for imports and conveniently pay off upcoming external debt installments in the current fiscal year.
Pakistan is facing a balance-of-payment crisis as its imports swell. The nation is looking to fill a gap of at least $12 billion, Finance Minister Asad Umar told Bloomberg in August. Pakistan is also negotiating a bailout package with the International Monetary Fund.